Related papers: Bifurcation in optimal retirement
This paper considers an optimal life insurance for a householder subject to mortality risk. The household receives a wage income continuously, which is terminated by unexpected (premature) loss of earning power or (planned and intended)…
This paper studies a life-cycle optimal portfolio-consumption problem when the consumption performance is measured by a shortfall aversion preference with an additional drawdown constraint on consumption rate. Meanwhile, the agent also…
We consider a problem of optimal investment with intermediate consumption and random endowment in an incomplete semimartingale model of a financial market. We establish the key assertions of the utility maximization theory assuming that…
The decision to annuitize wealth in retirement planning has become increasingly complex due to rising longevity risk and changing retirement patterns, including increased labor force participation at older ages. While an extensive…
This paper investigates an infinite horizon, discounted, consumption-portfolio problem in a market with one bond, one liquid risky asset, and one illiquid risky asset with proportional transaction costs. We consider an agent with liquidity…
We study the Merton problem of optimal consumption-investment for the case of two investors sharing a final wealth. The typical example would be a husband and wife sharing a portfolio looking to optimize the expected utility of consumption…
We introduce an extension to Merton's famous continuous time model of optimal consumption and investment, in the spirit of previous works by Pliska and Ye, to allow for a wage earner to have a random lifetime and to use a portion of the…
The consumption function maps current wealth and the exogenous state to current consumption. We prove the existence and uniqueness of a consumption function when the agent has a preference for wealth. When the period utility functions are…
Evidence shows that the labor participation rate of retirement age cohorts is non-negligible, and it is a widespread phenomenon globally. In the United States, the labor force participation rate for workers age 75 and older is projected to…
In this work, we address the optimal retirement problem in the presence of a stochastic wage, formulated as a free boundary problem. Specifically, we explore an incomplete market setting where the wage cannot be perfectly hedged through…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
We pose an optimal control problem arising in a perhaps new model for retirement investing. Given a control function $f$ and our current net worth as $X(t)$ for any $t$, we invest an amount $f(X(t))$ in the market. We need a fortune of $M$…
We establish a rigorous duality theory, under No Unbounded Profit with Bounded Risk, for an infinite horizon problem of optimal consumption in the presence of an income stream that can terminate randomly at an exponentially distributed…
We determine the optimal investment strategy of an individual who targets a given rate of consumption and who seeks to minimize the probability of going bankrupt before she dies, also known as {\it lifetime ruin}. We impose two types of…
We establish when the two problems of minimizing a function of lifetime minimum wealth and of maximizing utility of lifetime consumption result in the same optimal investment strategy on a given open interval $O$ in wealth space. To answer…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
This paper studies an optimal investing problem for a retiree facing longevity risk and living standard risk. We formulate the investing problem as a portfolio choice problem under a time-varying risk capacity constraint. We derive the…
We consider the problem of optimal investment with intermediate consumption in a general semimartingale model of an incomplete market, with preferences being represented by a utility stochastic field. We show that the key conclusions of the…
We study the optimal investment-consumption problem for a member of defined contribution plan during the decumulation phase. For a fixed annuitization time, to achieve higher final annuity, we consider a variable consumption rate. Moreover,…
We study an optimal investment and consumption problem over a finite-time horizon, in which an individual invests in a risk-free asset and a risky asset, and evaluate utility using a general utility function that exhibits loss aversion with…